The life reinsurance market has consolidated significantly in recent years, according to a report by the insurance ratings agency A.M. Best Co. that said the number of players has shrunk to a point at which the top five have 75% of the market.
The amount of life insurance being reinsured has grown at double-digit rates for more than a decade, far outpacing the growth rate of the primary life insurance market, the report said on Monday.
But A.M. Best also said it believes further major consolidation is unlikely, partly because concentration in the life reinsurance market makes it difficult for direct writers to diversify counterparty credit exposures. Similarly, life reinsurers are subject to increasing exposures to single clients, the report said.
In addition, the major life reinsurance companies have grown quite large, and their already low cost structures reduce the probable efficiency gains available from further acquisitions, the ratings agency said.
One area of the reinsurance market holds opportunity for new entrants, according to the study - secondary guarantees on variable annuities. Any market downturn is expected to boost the demand for such insurance, A.M. Best said.
"When the inevitable market downturn occurs, there will be heightened interest in securing protection against guarantees embedded in market-based products," the report said.
